Force majeure and energy supply contracts in the Hormuz crisis

Crude prices have surged amid disruption in the Strait of Hormuz, with producers reportedly issuing force majeure notices on oil and LNG shipments. For companies operating in the region, key considerations include contractual triggers, notice requirements, and mitigation.

This briefing sets out the principal legal and practical issues for parties to energy supply contracts, and suggests steps that buyers and sellers can take to protect their position and manage exposure.

When can force majeure be invoked?

Force majeure clauses vary widely. Many require the relying party to prove that (i) an event beyond its reasonable control has occurred, (ii) that event has prevented or delayed performance, and (iii) the party has complied with any notice and mitigation obligations.

Disruption to shipping routes, closure of ports, or government action affecting supply may qualify depending on the drafting. Parties should check whether the clause lists specific events (e.g. war, blockade, acts of government) and whether there is a catch-all. Some clauses require the event to be unforeseeable; others do not.

Notice and mitigation

Contracts almost always require prompt notice of a force majeure event. Failure to give notice in time can be a bar to relief. Notice should describe the event, its impact on performance, and (if required) the expected duration. Keep evidence of when and how notice was given.

Many clauses also require the affected party to use reasonable endeavours to mitigate. That can include seeking alternative supply or routes, and keeping the counterparty informed. Document all steps taken.

Next steps

If you are party to energy supply contracts that may be affected by disruption in the region, we recommend reviewing the force majeure and related provisions (including termination and suspension rights), assessing whether notice or mitigation obligations have been triggered, and ensuring that internal and external communications are consistent with your legal position.

Our energy and dispute resolution teams advise on force majeure, supply chain disruption, and related contractual and regulatory issues. For further information, please contact us.